[2] Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56 (1996) (to be codified at 47 U.S.C. Section 151 et seq.). For consistency with the NPRM, we refer to provisions of the 1996 Act using the sections at which they will be codified.

[3] The existing cost allocation rules assign all LEC overheads to existing services. If the LECs also provide interexchange service, any charge for access above economic cost will allow the LEC a discriminatory advantage, because the LEC can set its access rates so as to advantage its interexchange services and disadvantage its competitors.

[4] MCI believes that the current nationwide average local service rate represents the most defensible definition of an "affordable" rate for the purposes of this proceeding.

[5] MCI has in the past advocated either the use of geographic cost zones or the use of census tracts to separate areas requiring high cost assistance from those that need no assistance. In either case, the concept of identifying high cost areas to target support flows is the same.

[6] Section 254(b)(4) states that all providers of telecommunications services should contribute to the preservation and enhancement of universal service. Section 254(d) states that the Commission's obligation is to ensure that providers of interstate services shall contribute, unless the Commission determines the contribution would be de minimis.

[7] Pursuant to Section 254(f), the states may also decide to increase the intrastate portion of the universal service subsidy, in response to state interests and needs. However, states must create specific, predictable, and sufficient mechanisms that "do not rely on or burden Federal universal service support mechanisms."

[8] The data necessary to run the model are unavailable for Alaska.

[9] See Letter from Glenn Brown to William F. Caton, Ex Parte RE: CC Docket 80-286, filed February 21, 1996.

[10] See MTS & WATS Market Structure: Third Report and Order, 93 FCC 2d 241, modified on reconsideration, 97 FCC 2d 682 (1983), modified on further reconsideration, 97 FCC 2d 834, aff'd and remanded in part, National Ass'n of Reg. Util. Com'rs v. FCC 737 F. 2d 1095 (1984) ("NARUC"), cert. denied, 469 U.S. 1227 (1985).

[11] NARUC, 737 F. 2d at 1134-35, and Rural Telephone Coalition v. FCC, 838 F.2d 1307, 1314-15 (D.C.Cir. 1988).

[12] See MCI Comments in Docket 80-286, filed October 10, 1995, incorporated herein by reference.

[13] Section 254(h).

[14] Capital costs include depreciation, return, taxes, and maintenance expenses.

[15] See Section 254(h)(3) and (4).

[16] Section 254(h)(5)(B) of the 1996 Act allows subsidy only to health care providers that serve rural areas, while Section 254(h)(1)(A) defines who is a health care provider.

[17] NPRM at para. 4.

[18] For example, the state of Oregon recently ended its alternative regulation plan for U S West due to concerns about the degradation of service quality since the beginning of that plan. This experience suggests that the incumbent LECs' quality of service may need to be monitored.